representing homeowners

Durbin: “And They Frankly Own the Place”

[Remember back in May when Durbin’s bankruptcy bill was defeated that would have allowed bankruptcy judges to modify a loan on a primary residence, and he made that speeech (brave in its honesty) on the Senate floor about how the banks still run the government and that American homeonwers have no powerful lobby to speak for them? In today’s week of hearing about Wall Street’s crazy bonuses (profits are easy to come by when you eat all of your competitors and gamble with cheap government money) and the appointment of a 29 year old Goldman employee to a head regulatory post at the SEC (are they punking us? I mean, seriously), Durbin’s lesson merits a quick review. ]

Senator Richard (Dick) Durbin remarked on power the financial services industry still wields at a time when that industry is theoretically under great scrutiny: “The banks — hard to believe in a time when we’re facing a banking crisis that many of the banks created — are still the most powerful lobby on Capitol Hill. And they frankly own the place.”

Full transcript here: http://www.pbs.org/moyers/journal/05082009/profile.html
The banking lobby won a significant victory in Congress on May 1, 2009 when 12 Democrats joined a united Republican Caucus to vote down an amendment to President Obama’s housing bill. At issue was a measure that would have allowed bankruptcy judges to modify mortgages to help homeowners avoid foreclosure.

The House version of the bill, which provides wide housing assistance and consumer protection measures, passed with the amendment, but Speaker Nancy Pelosi recently said she does not expect the measure to be included in the final bill since the Senate voted it down.

Democrats had hoped allowing bankruptcy judges to adjust mortgages on primary residences would encourage banks to renegotiate mortgages with homeowners facing foreclosure — a key part of President Obama’s plan to address the financial crisis. Judges are already permitted to adjust mortgages for second homes, farms and ranches. Banks claim that allowing judges to adjust primary mortgages would increase their risk and raise the price of mortgages across the board.

Senator Richard Durbin, who sponsored the amendment, explained to Bill Moyers on THE JOURNAL why he thinks it’s an important measure, and what eventually led to its defeat.

Senator Durbin mentions Simon Johnson’s recent article in the ATLANTIC, in which Johnson notes that even in the midst of great public unpopularity, the finance industry retains enormous power in the halls of Congress. Senator Durbin believes it was the banking sector’s opposition that defeated the bill, “The banking industry fought me tooth and nail, with one exception, Citigroup, that came out for this early on and stuck with me to the bitter end. But the banking industry, the associations and groups, fought me all the way.”

Two watchdog groups connect the banking industry’s continued political clout, despite its public unpopularity, to the amount of money they give to Congress in the form of campaign contributions. Following the defeat of Senator Durbin’s measure, The Center for Responsive Politics pointed out that the finance, insurance and real estate industry was the number one donor to 6 of the 12 Democrats who voted against the measure and was among the top donors to the rest.

And a recent report from the Center for Public Integrity shows that the 25 largest originators of subprime mortgages, the risky loans some say are at the heart of the recent financial crisis, spent over $370 million in Washington fighting against regulation. The report also found that at least 21 of the 25 ventures were either backed or owned by banks now receiving bailout money.

Senator Durbin recently introduced a bill with Senator Arlen Specter to create a voluntary public financing system for members of Congress. As he tells Bill Moyers on the JOURNAL: “I think that is a good move for our democracy, and it’s one which we ought to acknowledge is at the heart of many of the issues we face.”